Proposition 64

Background

California
ís unfair competition law prohibits any person from engaging in any unlawful
or fraudulent business act. This law may be enforced in court by the Attorney
General, local public prosecutors, or a person acting in the interest of itself,
its members, or the public. Examples of this type of lawsuit include cases
involving deceptive or misleading advertising or violations of state law
intended to protect the public well being, such as health and safety
requirements.

Currently, a person initiating a lawsuit under the unfair
competition law is not required to show that he/she suffered injury or lost
money or property. Also, the Attorney General and local public prosecutors can
bring an unfair competition lawsuit without demonstrating an injury or the loss
of money or property of a claimant.

Currently, persons initiating unfair competition lawsuits
do not have to meet the requirements for class action lawsuits. Requirements for
a class action lawsuit include (1) certification by the court of a group of
individuals as a class of persons with a common interest, (2) demonstration that
there is a benefit to the parties of the lawsuit and the court from having a
single case, and (3) notification of all potential members of the class.

In cases brought by the Attorney General or local public
prosecutors, violators of the unfair competition law may be required to pay
civil penalties up to $2,500 per violation. Currently, state and local
governments may use the revenue from such civil penalties for general purposes.

Proposal

This measure makes the following changes to the current
unfair competition law:

Restricts Who Can Bring Unfair Competition
Lawsuits. This measure prohibits any person, other than the Attorney
General and local public prosecutors, from bringing a lawsuit for unfair
competition unless the person has suffered injury and lost money or
property.

Requires Lawsuits Brought on Behalf of Others to
Be Class Actions.
This measure requires that unfair competition lawsuits initiated by any
person, other than the Attorney General and local public prosecutors, on
behalf of others, meet the additional requirements of class action lawsuits.

Restricts the Use of Civil Penalty Revenues.
This measure requires that civil penalty revenues received by state and
local governments from the violation of unfair competition law be used only
by the Attorney General and local public prosecutors for the enforcement of
consumer protection laws.

Fiscal Effects

State Government

Trial
Courts. This measure would have an unknown fiscal impact on state
support for local trial courts. This effect would depend primarily on whether
the measure increases or decreases the overall level of court workload dedicated
to unfair competition cases. If the level of court workload significantly
decreases because of the proposed restrictions on unfair competition lawsuits,
there could be state savings. Alternatively, this measure could increase court
workload, and therefore state costs, to the extent there is an increase in class
action lawsuits and their related requirements. The number of cases that would
be affected by this measure and the corresponding state costs or savings for
support of local trial courts is unknown.

Revenues. This measure requires that
certain state civil penalty revenue be diverted from general state purposes to
the Attorney General for enforcement of consumer protection laws. To the extent
that this diverted revenue is replaced by the General Fund, there would be a
state cost. However, there is no provision in the measure requiring such
replacement.

Local Government

The measure requires that local government civil penalty
revenue be diverted from general local purposes to local public prosecutors for
enforcement of consumer protection laws. To the extent that this diverted
revenue is replaced by local general fund monies, there would be a cost to local
government. However, there is no provision in the measure requiring the
replacement of diverted revenues.

Other Effects on State and Local Government Costs

The measure could result in other less direct, unknown
fiscal effects on the state and localities. For example, this measure could
result in increased workload and costs to the Attorney General and local public
prosecutors to the extent that they pursue certain unfair competition cases that
other persons are precluded from bringing under this measure. These costs would
be offset to some unknown extent by civil penalty revenue earmarked by the
measure for the enforcement of consumer protection laws.

Also, to the extent the measure reduces business costs
associated with unfair competition lawsuits, it may improve firmsí
profitability and eventually encourage additional economic activity, thereby
increasing state and local revenues. Alternatively, there could be increased
state and local government costs. This could occur to the extent that future
lawsuits that would have been brought under current law by a person on behalf of
others involving, for example, violations of health and safety requirements, are
not brought by the Attorney General or a public prosecutor. In this instance, to
the extent that violations of health and safety requirements are not corrected,
government could potentially incur increased costs in health-related